Tuesday April 27 2010
I suggest you look at Mish dated Monday April 26, 2010. This is an article about crowd sourcing.
Crowd sourcing is the act of taking a job traditionally performed by an employee and outsoucring it to an undefined group of people on a project-by-project basis, in the form of an open call.
Firms wishing to follow this model could encourage employees to set up a company with 10 or more colleagues, and buy back their services as and when needed.
Big oil companies have been doing this since the 1960s, and have only accelerated their desire to do it since. I was part of a family owned business which followed this model. My Dad had been employed by Gulf Oil. He got 'retirement' at age 55, a $350 a month check. He did exactly what crowd sourcing suggests. He organized a group of oil field maintenance workers and contracted them to Gulf Oil. As the price of oil rose in the 1970s, Gulf used more and more contract employees, the business grew. Why? Simple, Gulf did not want to incur the cost of hiring their own employees, much less the headache of dealing with unionized employees. When Chevron bought Gulf, they forced all the 'contractors' to bid for the work. As a CPA I knew my costs and would not bid below them. Others did not know their costs. I of course did not win the bid, the chap that outbid me of course was out of business in one year. Chevron had succeeded in finding the lowest possible cost by enticing someone to bid below their own cost, a good deal for Chevron I guess.
Congress was determined to pass the Windfall Profits Tax on Oil Companies, it did and the companies quietly started leaving the US. Many large former oil company office buildings in Midland, Odessa, and Andrews, all oil producing counties, are vacant today. Chevron was a company of about 50,000. It has since bought Gulf, Texaco, and Unocal, all similar sized companies. Guess what, Chevron is still a 50,000 employee company. The other 150,000 are gone as are most of the contractors.
In Austin, TX just up the road semi conductor manufacturers use temp workers from Addeco or Kelly or some such crowd sourcing employer. The move by the Administration to force employers to provide more benefits will result, I promise, in fewer jobs. No private sector jobs have been created by the so called stimulus bills, a lot of govt jobs have been created. Now govt jobs are at risk in Greece, IL, CA, New Jersey for the same reason.
This article suggests that IBM will continue the trend. Of course they will! Everyone is a contract laborer now.
Bottom line, are you prepared to go it alone? What if private hiring collapses? As Mish says, this is deflationary.
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